Credit to private sector hits N15.5tr

Lending to the private sector increased to N15.5trillion ( $96.8billion) in May, this year, FBN Capital Limited has said.

The investment and research firm in its report titled: “Lending growth to the private sector subdued’, said state governments that are part of the private sector, borrowed N691billion ($4.3 billion) as at April, this year.

Noting that the Federal Government is not part of the private sector, FBN Capital said that the private sector stands for the domestic sector of the economy.

“Net loans from the banking system to the private sector increased in May by just 0.5 per cent monthly and seven per cent yearly. The private sector in this case is defined as the domestic economy other than the Federal Government of Nigeria, and thus includes the state governments, whose borrowings amounted to N691billion ($4.3billion) as at end-April,” the investment firm said.

The total for the private sector in May was N15.5trillion ($96.8billion).

The firm said the deposit money banks accounted for about 70 per cent of N15.5trilliion loan, while the Central Bank of Nigeria (CBN) accounted for the remaining 30 per cent in the form of Asset Management Corporation of Nigeria (AMCON) bonds, which are to be refinanced.

It noted that banks’ credit to the private sector has increased in April by 1.0 per cent month to month and 11 per cent year-to-year, adding that the data is one month older when stripping the CBN from the figure for the banking system.

According to the firm, soaring loan growth in 2007 and 2008 resulted in the country’s domestic event – that is the two bailouts by the CBN in 2009. It noted that the granting of the bailouts coincided with the global financial meltdown, adding that the banks have learnt some lessons as a result of the developments. Besides, it noted that the regulatory authorities have put in place financial tightening measures.

“ Nonetheless, the banks have indicated a more rapid loan book expansion this year than in 2012, and some have guided to as high as 20 per cent,” FBN Capital added.